One of the most penetrating dangers of our time was described by the 20th century writer C.S. Lewis as “chronological snobbery”, that is, the uncritical acceptance of something merely because it belongs to the intellectual trends of our age. Avoiding such a danger requires both intelligibility of res novae and moral commitment. Across the globe we are seeing two parallel developments unfold, which undermine the realization of a truly participatory society both within and across the nations of the world. First of all, a growing concentration of wealth and a centralization of power which divide societies along old and new lines. Secondly, the division between the “winners” and “losers” of global integration and technological progress is threatening to derail growth. In his Introduction to the present volume, Pierpaolo Donati writes: “We are asked to outline and implement a kind of society that can ensure the full participation of all its members, not simply in terms of compensation or compassion for the most disadvantaged, but in terms of a just and sustainable societal configuration in which people have the opportunity to pursue a good life for themselves and for everyone else”. In what follows, I will speak in favour of the civil economic paradigm as a concrete and original way to cope with the intellectual challenge posed by Donati.

To this end, I deem it proper to consider a few stylized facts characterizing the present time. Firstly, the political system has not yet been able to significantly modify the financial institutions responsible of the present crisis. Under these conditions, there is no guarantee that in the next 15-20 years another bank and financial crisis will not occur. In his latest book,[2] Alan Greenspan writes: “Our highest priority going forward is to fix our broken political system. Short of that, there is no viable long-term solution to our badly warped economy”. It is a fact that the economic machinery continues to operate in an intolerably unfair way. Inequality has become endogenous to the system and this not only generates economic costs (e.g. speculative bubbles, decreasing rate of investment; consumption distortions), but, above all, it gives rise to social and human costs. Indeed, an inequality rate exceeding a certain threshold reduces health and increases mortality rates.[3] In recent years, neither economic theory nor empirical evidence have been able to confirm the presumed trade-off between equality and efficiency, as exposed in the classic work by Arthur Okun.[4] In 2014 the IMF produced empirical results showing that greater equality is associated with faster subsequent medium-term growth, both across and within countries. So, there is no economic justification to endorse inequality. On the contrary, fairness is so central to humans that one can infer that it has evolutionary roots (Brosnan and de Waal, 2003). The probable reason is that cooperation was crucial for the survival of the tribe. Evolution favoured the propagation of those traits that predisposed us to value fairness. In spite of the widespread prevalence of this disposition, the notion of fairness is not firmly integrated into mainstream economics. It remains well behind concepts such as efficiency, even though there is no evidence that the latter is more important to us than the former.

Secondly, the scaffolding of the present-day market system tends to erode some of the values that support our civilization. Indeed, the Schumpeterian process of creative destruction applies not only to firms and to inputs of production, but also to the very values that gave rise to market capitalism in the first place. In particular, the present market system tends to empower the strong over the weak and to make people believe that greed is the appropriate way of incentivizing economic agents and achieving the best results. However, this is a mere ideological approach to the problem. It is revealing what Mark Carney – the governor of the Bank of England – declared at a PASS workshop in July 2014: “Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-run dynamism of capitalism itself”.[5]

Thirdly, the point above deserves further consideration. F. Hayek’s The Road to Serfdom had an enormous impact on the evolution of the spirit of the times as far as economic thinking was concerned. Especially on M. Friedman’s thinking. Through his two books Capitalism and Freedom (1962) and Free to Choose (1980), the founder of the Chicago School of Economics amplified Hayek’s impact. The efforts of these two Nobel laureates culminated in M. Thatcher’s and R. Reagan’s determination to “roll back the state”, at the end of the ’70s. The result was a concentration of power in the hands of an elite that had never been seen before. The accumulation of great fortunes undermined the political system not only through lobbying and campaign contributions, but also by discouraging people from political participation. “From 1998 through 2010, business interests and trade groups spent $28.6 billion on lobbying compared with $492 million for labor, nearly a 60-to-1 advantage”.[6] As underlined by J. Komlos,[7] the general point is that the concentration of riches enables the elite not only to engage in conspicuous consumption that makes the rest of the population feel inferior, but also enables them to “buy” economists as well as politicians.[8] That defines another road to serfdom. Hayek’s mind was closed to the possibility that there were multiple threats to individual freedom. He feared exclusive state power and failed to see that any concentration of power can become a serious threat. He believed that as soon as one abandons laissez-faire, one is on a slippery slope and there is no turning back. Yet, there is an alternative to both extremes, as I will indicate below. Meanwhile, let us recall Pope Francis’ warning: “A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules”.[9]

Fourth, and as a consequence of the above, global capitalism as a model of social order, has increasingly assumed the characteristics of a religion, since it posits an overarching goal for human life and seeks to pursue it on the basis of a specific concept of human being. One is reminded of the prophetic essay by the philosopher Walter Benjamin,[10] where the author clarifies that capitalism serves to satisfy the same worries, anguish, and disquiet formerly answered by religion. Today, the masking of the ideological nature of global capitalism takes place in two ways, as posited by P. Williams.[11] On the one hand, decisions with moral content are presented in technical terms (e.g.: human rights have to be limited for the sake of efficiency). On the other hand, technical arguments are put forward as genuine moral alternatives (e.g. the market versus state alternative is presented as if it were an ideological question). I do believe that it has become urgent to try to de-mask the ideological nature of the global economic order. Let us recall that ideology consists in labelling as “order” what is in fact a complex pattern of hierarchical, asymmetrical power relationships. The path from ideology to idolatry is a short one.

Fifth, climate change and environmental degradation (in particular the loss of biodiversity) threaten to reverse the recent noteworthy achievements in the fight against poverty. The World Bank estimates that the proportion of the world’s population living in extreme poverty has declined significantly, from 37.1% in 1990 to around 9.6% in 2015. However, the poorest people in the world face grave and imminent risks from global warming. The very life support of the poor – including the ability to grow food and to access safe water – is under dire threat.

Finally, social science – and specifically economics – still lacks a fully fledged theory explaining how a traditional society plagued with endemic poverty can evolve towards an advanced economy. We know how to compare different economic systems and we also know which factors are strategically important for progress. Yet, full knowledge of how to enhance the transition of a given society from an old social equilibrium to a new one is still missing. This is a real paradox of the intellectual life of capitalism, which is still seeking a plausible and rigorous explanation of the rise and decline of market economies. How is it that the market in certain historical periods becomes the dominant system of exchange and allocation of both outputs and factors of production; and how does it manage to supersede non-market systems such as those offered by the state, associations, corporations, and manorial systems? In a recent contribution, van Bavel shows that such a process is neither the result of the detrimental effects of non-market forces, nor of external shocks, of a climatologic, epidemic or military nature. Rather, the causes of that process are mainly endogenous; i.e. they are the effect of the forces called forward by dominant markets themselves and the market elites they created. In turn, dominant groups use their economic strength to acquire status and political leverage that allow them to obtain means of coercion to compensate for the reduction in productive investments. This explains why and how the dominating rise of factor markets is self-undermining. Success in terms of economic growth enables a few market elites to privatize and accumulate financial assets, natural resources and machinery. Over time, this leads to social polarization and a reduction in welfare for those who are marginalized. The ensuing escalation of wealth inequality leads to institutional sclerosis due to an increase of rent-seeking behaviour. In turn, as the organization of factor markets becomes more and more skewed towards the interests of the market elites, economic growth turns into stagnation. People start to retreat from the market, looking for alternative systems of exchange and allocation. The process thus ends in the decline of the market economy.[12]

These and many other facts are strictly connected to the emergence of a global economic order that has come to represent the most characteristic feature of our age. Globalization entails many dimensions, but it is a fact that the creation of a global financial market constitutes the most relevant one. The increasing importance of the financial structure, with respect to the real side of the economy, is posing a novel paradox. At a time when we would need more regulation, just because financial markets are intrinsically unstable, we have less, since international financial institutions are weaker, in relative terms, than domestic ones, or even non-existent. As we are reminded by Charles Kindleberger: “If there is no authority to halt the disintermediation that comes with panics, with forced sales of commodities, securities, and other assets, … the fallacy of composition takes command. Each participant in the market, in trying to save himself, helps ruin all”.[13] The recent financial crisis is a clear, albeit sad, confirmation of this.

In light of the above, what can be done if one wants to foster the transition towards a more participatory society? The distress that comes from many tragic events and cases of destitution leads us to identify it with the litmus test of the seriousness of our declarations. Including means sharing, participating. It entails the transition from being a stranger and misfit to being an active subject, from a subject to a sovereign citizen. It should be noted that the term inclusion expresses the common thread that binds all the reflections and admonitions from Paul VI to Pope Francis.

The proposal made here draws on the grand tradition of civil economy. The civil economy paradigm teaches that market trade is not merely impersonal exchange, but also an exercise in civil virtues. Indeed, underpinned by burgeoning empirical evidence, market exchange can build social solidarity when buyers and sellers recognize and embrace the moral underpinnings of mutually beneficial trade. In mainstream economics, one side of the market exchange is excused for “deceiving” the other side of the exchange as long as it is within the law. Caveat Emptor is the brutal standard. In the perspective of civil economy, by contrast, both sides of a market transaction accept the moral responsibility to ensure the mutual benefits of trade by avoiding exchanges that advertently or inadvertently harm the other party or other stakeholders.

Even though there is no commonly accepted definition of the expression “civil society organizations”, the latter should be understood as organizations that are independent from governments and firms and operate on the basis of common values (such as human rights, democracy, freedom, solidarity and equality). It is a fact that the majority of criticism put forward by civil society in recent years and initially dismissed by governments and mainstream academics – on issues such as the rise of inequality, too-big-to fail banks, the impact of austerity policies, etc. – are now increasingly shared by mainstream organizations, think-tanks and government agencies. The most striking recognition has come from the IMF, which has reversed several of its standard policy recommendations.[14] Bridging the chasm between the institutional dimension of a country and its social dynamics is one of the major challenges facing our societies today.

2. What is civil economy

The expression “civil economy” is now as equally recurrent in academic discussion as in the media, but it carries multiple, at times conflicting meanings. Some confuse it with the expression “social economy”, while others claim that “civil economy” is just a different, older name for “political economy”. There are those who identify the term with the varied world of non-profit organizations, and others who go so far as to see civil economy as an intellectual project opposed to the economy of solidarity. Misunderstandings and incomprehension of this sort not only complicate dialogue between scholars who legitimately espouse different worldviews; what is worse is that ignorance of what civil economy is, instead of inducing intellectual humility, often feeds ideological prejudices and is used to justify sectarian closed-mindedness.[15]

What is needed, then, is to clarify, to explain terms and elucidate concepts that were part of the lexicon of economics until a couple of centuries ago but have now literally vanished. Above all, we need to explain why interpersonal relations cannot be kept outside the main body of economic research any more. That is, we need to make the case for a different hermeneutical paradigm from those used today: namely, the relational paradigm.[16] Interpersonal relations are one of the central themes in the civil economy tradition, the Italian school of thought that dominated the scene until the end of the eighteenth century. In continuing to ignore interpersonal relations as explanations for economic phenomena, social scientists are doing a disservice to themselves and, even more, to society. This is paradoxical indeed for a discipline like economics, which from its very origins has been intimately concerned with relations among men in society (crucial to such key concepts as the production of goods and services, consumption choices, market exchange, institutional arrangements, and so on).

To avoid misunderstandings, it is proper to distinguish between social interaction and interpersonal relations. Whereas in the case of the latter the personal identities of the people involved are a constituent of the relation itself, social interactions – as they are studied in the literature on social capital – can perfectly well be anonymous, impersonal. An example drawn from the work of Robert Putnam illustrates this difference: an increase in the number of members of social organizations is not always accompanied by a greater, more intense participation in the activity and decision-making of those organizations. The statistician notes that the stock of social capital has increased, but it certainly cannot be said that the quality of interpersonal relations has improved.

This point is important, and worth underlining. That “man is a social animal” is a proposition that no one has ever questioned. But the sociability of human nature, defined as a positive attitude towards other human beings, is something quite different. Adam Smith was one of the first to see that social interaction does not necessarily postulate or generate sociability, so that if all we are interested in is the study of market mechanisms there is no need to assume that agents have socially oriented motivations. To explain how the market works, it is sufficient to assume a single attitude on the part of economic agents, namely – in Smith’s famous phrase – the “human propensity to truck, barter and exchange things”. And this, with rare exceptions, has been the course of economic science for over two centuries. The theories of contracts, of business organization, of prices, of market forms, etc., do not need to bother with the category of “person”: an informed, rational individual is sufficient.

Today, however, we have come to the point where even the most “detached” economists cannot but admit that if we want to fight new problems of our society – such as those mentioned in the Introduction above – research simply can no longer confine itself to a sort of anthropological limbo. One must take a position on the matter, selecting a standpoint from which to scrutinize reality. Otherwise, economics will continue to spread, to enrich its technical and analytical apparatus, but if it does not escape self-referentiality it will be less and less capable of actually grasping reality, and thus of suggesting effective lines of action. There is no denying that this is the true risk that our culture runs today.

What is civil economy, then? Civil economy represents a tradition of economic and philosophical thought rooted proximately in civic humanism (15th century) and more remotely in Aristotle, Cicero, Aquinas and the Franciscan school of theology. Its golden age, when it was at the height of its influence as a school of economic thought, came about in the Italian Enlightenment, and specifically in the Neapolitan and Milanese one. While Adam Smith and David Hume in Scotland were developing the principles of political economy, in those same years Antonio Genovesi, Gaetano Filangieri, Ferdinando Galiani, Giacinto Dragonetti in Naples, and Pietro Verri, Cesare Beccaria, Giandomenico Romagnosi in Milan were developing civil economy. The Scottish and Milanese-Neapolitan schools had many features in common: the diatribe against feudalism (the market seen as the main way out of feudal society); the praising of luxury as a force for social change, with little concern for the “vices” of the consumers of luxury goods and much more for the benefits for all of society; a great ability to comprehend the cultural revolution that the growth of trade was bringing about; the recognition of the essential role of trust in a market economy and for cultural progress; the “modernity” of their views of society and of the world.

Yet there is also a crucial difference between the Scottish schools of political economy and civil economy. Smith, even while acknowledging that men have a natural tendency towards sociability (“sympathy” and “correspondence of sentiments”), does not consider genuine, non-instrumental sociability or relationality to be relevant to how markets work. In The Theory of Moral Sentiments he says that “civil society can exist between different persons ... on the basis of the consideration of individual utility, without any form of reciprocal love or affection” (II,3.2, emphasis added). And in some passages both of the Theory and of The Wealth of Nations he writes explicitly that sentiments and benevolent actions complicate the operation of the market, which functions better the more instrumental the relations within it are. For Smith, and for the tradition that, following him, became the official thought in economics, the market is the means for building relations that are genuinely social (no civil society can exist without the market) because it is free of vertical bonds and unchosen status; but the market is not, per se, the locus of all-round relationality. That mercantile relations are impersonal, with mutual indifference, is not a negative but a positive, civilizing characteristic, in Smith’s eyes. This is the only way the market can produce wealth and progress.

In other words, friendship and market relations belong to two distinct, separate spheres. The existence of market relations in the public sphere (and there only) ensures that in the private sphere friendship is genuine, freely chosen, and unconnected with status. If a beggar asks a butcher for alms, he can never have an authentic friendship with him outside the market. But if one day a former beggar comes into the butcher’s shop or the brewer’s shop to buy their goods at the going price, that same evening the ex-mendicant can meet his shopkeepers at the pub on a plane of equal dignity and possibly be friends with them. “Nobody but a beggar – wrote Smith in the Wealth of Nations – chooses to depend chiefly upon the benevolence of his fellow-citizens” (1776). For Smith and traditional economic doctrine, the market is civilization but not (and precisely because it is not) friendship, disinterested reciprocity, fraternity.[17] The point deserves a few lines of clarification. It is known that a permanent tension exists between gift and law (legal and moral). And not only tension, but at times also conflict, especially with some moral traditions like the Puritan one that considers actions complying with duty superior to those stemming from love. As Weber wrote in his Protestant Ethics, “A higher ethical value is attached to the accomplishment of duty without love than to sentimental philanthropy”.[18] Why? Because while the Kantian morality seeks universal principles independent of social ties (and the market exchange principle seeks equivalence also independently of those ties), things tend, on the contrary, to be embedded in social ties. They circulate in the name of friendship, embedded in a social relationship, not in the name of an abstract principle. A gift is an invitation to a relationship: to a reciprocity relationship, to be precise.[19]

The civil economy tradition dissents from these fundamental postulates of modern economic theory and practice. For the civil economy school, the market, the enterprise, the economy are themselves the place for friendship, reciprocity, gratuitousness and fraternity. Civil economy rejects today’s increasingly common notion, taken for granted, that the market and the economy are radically different from civil society and are ruled by different principles. Instead, the economy is civil, the market is life in common, and they share the same fundamental law: mutual aid. Antonio Genovesi’s “mutual aid” is something more than Smith’s reciprocal advantage. For the latter, a contract will suffice; for the former you need philia, perhaps agape. For civil economy the actual “golden rule” of the market is reciprocity, since contracts, businesses, and exchanges are matters of cooperation and of common advantage, i.e. forms, albeit different one from another, of reciprocity. In place of Smith’s assumption of a peculiar human prosperity “to truck, barter and exchange one thing for another”, Genovesi grounds his analysis of markets on an assumed human inclination towards mutual assistance, as evidenced by his famous phrase “Homo homini natura amicus”, in contrast to Hobbes’ “Homo homini lupus”.

Following Shaftesbury, Genovesi claims that a sense of reciprocity is a fundamental property of human nature, prior to rational reflection. He gives mutual assistance the status of natural law in the form of “a reciprocal right to assistance and consequently a reciprocal obligation to assist each other in our needs”.[20] Notice the difference between exchange and mutual assistance. In an act of exchange, each party benefits from a transaction which is possible only because it benefits the other. Still, neither party need have any concern for the other’s interests. Mutual assistance implies more than this. It implies the intention on the part of the person who assists to benefit the person who is assisted. If assistance is mutual, these intentions are reciprocal. Again, consider the difference between linking social capital and bridging (or bonding) social capital in R. Putnam’s sense.[21]

Linking social capital refers to the mechanisms that enable a community’s associational capacity to express itself through interactions with political institutions and businesses, thus contributing to the production of public goods and policy outcomes at large. So linking social capital, depending on the bridging-bonding balance of social capital in a specific society, can either reinforce desirable public policy outcomes, when the bridging type is in high supply, or hinder them, when bonding social capital dominates. The question is whether or not social capital (bridging and looking) can be created, in cases where it is lacking. On the one hand, according to the “endowments” approach favoured by scholars such as Fukuyama (The End of History 1995) and Putnam (1993), social capital is created via a long-term process of self-reinforcing virtuous cycles of civil society. On the other hand, the “constructability” approach contends that social capital can be built in the short-medium term through synergistic relations between state, market and civil society organizations. The latter is the approach favoured by the civil economy perspective.

In the end, the reductionist course of economic science beginning in the second half of the nineteenth century disarmed critical thought, with results that are now clear to us all. Economics has a definite responsibility in this: for too long it taught generations of scholars that scientific rigor was inherently aseptic, that research, in order to be scientific, had to liberate itself from all value judgments. The consequences are in plain sight. Axiological individualism – itself a pre-analytical assumption, a value judgment and a very strong one at that – has gained the status of “natural” assumption, which means, firstly, that it needs no justification and secondly, that it serves as a benchmark against which any other hypotheses concerning human nature “must” be measured. So it should be no surprise that orthodox economics grants the privilege of “naturalness” to individualism alone.

Civil economy today stands as an alternative to mainstream economics, which sees the market as the only institution that democracy and freedom really need. Civil economy serves to remind us that while a good society is, of course, the fruit of the market and of freedom, there are also needs, which can be traced back to the principle of fraternity, that cannot be ignored. At the same time, civil economy does not side with those who fight against the markets and who see economic action in an endemic and natural conflict with the good life, who cry out for less growth and for the retreat of the economic dimension from life in common. Rather, the civil economy approach proposes a multi-faceted humanism in which the market is neither resisted nor “controlled”, but considered as a moment of the public sphere which, when conceived and experienced as a place open also to the principles of reciprocity and gratuitousness, can build the civitas. (According to Cicero, civitas was the “city of souls”, whereas urbs was the “city of stones”).

3. Calibrating welfare policies in terms of circular subsidiarity

In what follows, I will consider a few relevant results that the adoption of the civil economy paradigm entails. The first has to do with a new way of conceptualizing the implementation of welfare policies in present-day societies.

Granted that everybody accepts that a welfare system should be based upon universalistic principles, the question that naturally arises is how to design a universalistic welfare system without falling into the trap of assistentialism. In other words, is it possible to conjugate solidarity (equity) and subsidiarity (reciprocity) in a credible and sustainable way? The affirmative answer is to be found in the creases of the following consideration. The constituent elements of the state’s intervention in a universalistic welfare system include three main duties: (1) the definition of a set of social services (as well as their relative codified quality standards) that are guaranteed to all citizens; (2) the implementation of access rules for those services and the necessary redistribution rules to ensure that all citizens can effectively benefit from them; and (3) the exercise of forms of control on the effective allocation of the services to people. These are the three specific functions of the state-as-regulator. The task of directly producing the services or managing their allocation is not a constituent of the state’s task.

It is certainly possible for the state, in the universalistic model, to supply one service or another as a public monopoly in particular and extraordinary historical or geographical contexts, under the condition that it can offer its citizens the proof that the benefits for becoming the producer will prevail over the costs of that decision. In other words, in the universalistic model, the functions of the state-regulator can be said to be a priori, while making justifications for the state-manager or state-producer are a posteriori – that is, the state must accept the scrutiny of the same evaluation process as every other supplying entity. Such a scrutiny becomes all the more necessary when considering the huge tradeoff between management and regulation. The greater the state’s role as manager, the lesser its capacity to regulate, and thus the lesser its capacity to insure those objectives of equity and efficiency that are the hallmarks of any social security system. It is a fact that the hyper-bureaucratization of the state, on the one hand, and the growing inequality caused by the concentration of capital and wealth in the hands of a few, on the other, have caused an erosion of the political agency of individuals and local communities, thus leaving many feeling powerless when faced with the forces that influence their lives. Given that it is practically impossible for marginalized people to engage in public reasoning processes without being nurtured by certain webs of relations which first recognize them as persons, it is necessary to implement projects at the grassroots level if one wants to revert processes of urban segregation and exclusion.

In this regard, the practice of “community organizing” represents a viable option. Community organizing represents an alternative mode of political engagement that allows people, whose voice would not otherwise be heard by those who hold political and economic power, to contribute to the political process in ways that effect meaningful change. Paul VI in his Populorum Progressio (1967) encouraged the idea that people should be allowed to become “artisans of their own destiny” (65) and become involved in forms of grassroots and economic democracy. Community organizing is neither simply oppositional nor does it simply aim to become a protest movement.

Having clarified that, let us return to the question of how to build a welfare society. There are basically three models under discussion today in both the political and economic arenas. They tend to be identified by the central institution that embodies and enforces their respective and distinctive guiding principle: the community, the market and the state. The three guiding principles are: reciprocity, exchange of equivalents, and hierarchical control, respectively. Clearly, modern societies, polities and economies can only be analysed in terms of some combination of these. Today, social scientists are groping around in the attempt to find concepts in order to identify these interactions. While some point out incompatibilities between the three ordering principles, others emphasize their complementarities. The first model is the neoetatistic one, according to which the state, while conserving its monopolistic role as a purchaser, should give up its monopoly over the production and allocation of welfare services. Known as the welfare mix, the government avails itself of the help of civil society organizations to allocate services, yet makes political decisions on its own. The government is the only agent responsible for formulating and programming interventions. The third-sector subjects simply implement the decisions taken by government. In the welfare mix, therefore, the third sector is supplementary or, at best, a resource with respect to government intervention. Such a characterization helps us understand the difference between the “subsidiarity principle” and the “surrogacy principle”. Indeed, while the former declares that the state must promote the organization of civil liberties, favouring all those collective forms of action that have public (i.e., general) effects, the latter affirms the contrary. The surrogacy principle means that intermediate bodies of society should do all that the state is incapable of doing or has no interest in doing.

The second model – the neoliberal one, also known as “compassionate conservatorism” –gives philanthropy and volunteer action the job of meeting the needs of those left behind in society, while government intervenes only successively on strongly selective bases. While this model values civil society and its organizations, it is inadequate in maintaining the universalistic principle. This is the favourite model of neoliberal thought that sees third-sector organizations as a minor segment of the private market, and in any case, a segment that has to be functional to the for-profit logic of the market. It may be of interest, in this regard, to report a passage from an interview with Peter Drucker of some time ago: “Above all we are learning very fast that the belief that the free market is all it takes to have a functioning society – or even a functioning economy – is pure delusion. Unless there is first a functioning civil society, the market can produce economic results for a very short time – maybe three or five years. For anything beyond these five years a functioning civil society – based on organizations like churches, independent universities, cooperatives, and so on – is needed for the market to function in its economic role, let alone its social role”.[22]

Finally, there is the civilwelfare model endorsed by the civil economy perspective. This model recognizes civil society organizations as active partners in the process of programming interventions and in the ensuing implementation. In practice, this means that it is not enough to recognize the legal subjectivity of these organizations. It is also necessary for economic subjectivity to be recognized. Autonomy, in the sense of being able to exist without the vexations of concessionary regimes, while maintaining the possibility for self-organization, is not enough. What is also required is financial and economic independence; that is, each organization must have the capacity to realize its own programs and to achieve its own objectives without depending, in a constraining way, on either the government or for-profit firms. That is the ultimate purpose of social finance, an expanding area of research in the last couple of decades.[23]

The systemic – not merely situational – crisis in the welfare state has brought about a growing interest in the civil welfare model for some time. In the civil welfare model, the entire society, and not just the state, must take responsibility for those that live in it. In parallel to this concept, the principle of circular subsidiarity has begun to emerge. If society as a whole should take care of all those who live in it, without exclusions of any kind, it is clear that it is necessary to create a relationship among the three points of the social triangle – that is, the three spheres that make up the whole of society. These are the sphere of public authorities (the state, regions, communities, and various para-state entities), the corporate sphere (the business community), and the sphere of organized civil society (various associations, social co-operatives, NGOs, social enterprises and foundations). The idea of circular subsidiarity is basically the following: the three spheres must find ways to systematically (not occasionally) interact when planning and executing interventions, as well as managing them.

A significant benefit of the civil welfare model is that, when resources are lacking, these can be drawn from the corporate world. When we say that “resources are lacking” the reference is to public resources, rather than to private resources which, on the contrary, are present and continually increasing. The point is that until now no one has thought to draw from the corporate world, in order to channel their available resources to supply welfare services. On the flip side, the presence of the public authority remains fundamental in this model in order to guarantee universalism: the danger of excluding some social groups from benefiting from services must always be kept in mind. That part of civil society still called “non-profit” or “third sector” (although it would be better to talk of civil society organisations) occupies a special place in circular subsidiarity, in that it has specific knowledge (who better than an association of volunteers can know if there are particular needs to be met in a neighbourhood?) and means of governance that are capable of raising the relational quality of services provided.

A clarification is appropriate here. We are discussing circular subsidiarity, not horizontal and/or vertical subsidiarity. While the last two fit well with the welfare capitalism and welfare state models, they are not capable of supporting the civil welfare model, for reasons that are readily explained. In the two traditional forms of subsidiarity, the state cedes portions of its sovereignty to territorial and/or functional public entities (vertical subsidiarity) or to members of civil society as cultural actors (horizontal subsidiarity); in circular subsidiarity sovereignty is shared. “The state should not do what can best be done by lower-level entities and members of the civil society” is the slogan of vertical and horizontal subsidiarity; “the state should work together with companies and non-profit actors”, describes circular subsidiarity. It may interesting to recall that the first conceptualization of the notion of circular subsidiarity can be found in the work of Bonaventure of Bagnoregio (13th century professor of philosophy at the Sorbonne in Paris, and General of the Franciscan Congregation) when he wrote that the economic sphere, the governmental sphere and the religious sphere “are three different but integrable degrees of an organization of reality”.

In order to avoid misunderstandings, let me stress that affirming that public authorities no longer hold the monopoly of public action does not imply that the responsibility of the state is transferred to civil society and the market. Nor does it imply accepting the thesis of the inefficacity of the state as a regulator of production, exchange and distribution of wealth. The history of democratic societies is usually presented as consisting of two main periods: the expansion of markets into pre-existing communities in the 19th century, and the expansion of the interventionist state into the new market economy in the 20th century. Civil society organizations were regarded with suspicion in both periods: in the former, as impediments to the development of free market; in the latter, as obstacles to the growth of the state. The novelty in the 21st century is the emergence of a model of social order where civil society organizations are capable of making and implementing a large share of public policy. However, civil society organizations are not about to replace market and state, even if there is growing evidence that there is a certain range of policy areas for which these entities may produce more socially adjusted and normatively acceptable results than either free-trade, etatism or communal self-help.[24]

4. The return of the common good category

A second major by-product of the recent revival of the civil economy perspective concerns the

return to the public sphere of the “common good” as a concept. After over two centuries in which it disappeared from the scene, and supplemented by notions such as “the general interest”, “the collective good”, “the total good”, why has such a notion re-emerged over the last twenty years or so? Why is the transition from national economies to a global economy making the discourse on the common good a matter of interest?

In response, it is useful to note that since the first half of the nineteenth century, the vision of the civil economy has disappeared from both scientific research and political and cultural debates, as has been noted. There are various and diverse reasons for this gap; I will limit myself to indicating the two most relevant ones. On the one hand, Jeremy Bentham’s utilitarian philosophy, whose main work was published in 1789, took many decades before becoming the dominant ethical position in economic discourse, but it then spread like wildfire through high European culture. It was because of a utilitarian ethics – rather than a Protestant ethic, as some still believe – that the hyper-minimalist anthropology of homo oeconomicus took hold within economic science, and with it the methodology of social atomism. The following passage from Bentham is noteworthy for its clarity and depth of meaning: “The community is a fictitious body, composed of the individual persons who are considered as constituting, as it were, its members. The interest of the community then is, what? – the sum of the interests of the several members who compose itˮ.[25]

On the other hand, industrial society fully asserted itself after the Industrial Revolution. An industrial society is one that produces goods; machines dominate everywhere, and the rhythms of life are mechanically paced. Energy largely replaces muscular strength and accounts for the enormous increases in productivity, which in turn is accompanied by mass production. Energy and machines transform the nature of work; personal skills are broken down into elementary components, hence the need for coordination and organization. In this way a worldview advances in which people are seen as “thingsˮ, because it is easier to coordinate “thingsˮ than people; in such a world the person is detached from the role he/she plays. Organizations, primarily companies, work with roles and less with people, and this happens not just in factories, but in the whole of society. This is the deep sense in which Fordism and Taylorism were successful attempts to theorize and put in practice this model of social order. The establishment of the assembly line found its correlate in the spread of consumerism, hence the schizophrenia of modern times: on the one hand, it exacerbates the loss of meaning in work, a result of alienation due to the depersonalization of the worker, and on the other hand it encourages opulent consumption as a way to compensate. Over the course of the twentieth century Marxist ideology and its political expressions endeavoured, with varying but modest success, to offer a way out of such a societal model.[26]

At this point it is not difficult to explain the return of the concept of “common good” to contemporary cultural debate. Faced with the squalor of the tendency to reduce human relations to an exchange of equivalent products, the spirit of the contemporary person rises up and demands something different. The keyword that describes this need better than any other is “fraternity”. This word was present in the flag of the French Revolution, but the post-revolutionary order abandoned it for the reasons noted, to the point that it was removed from political and economic lexicons. The Franciscan school of thought gave this term the meaning that it has preserved over the course of time, which at once fulfils and surpasses the principle of solidarity. Indeed, while solidarity is the principle of social organization that allows those who are not equal to become equal, the principle of fraternity is the principle of social organization that allows equals to be diverse. Fraternity allows people who are equal in dignity and basic rights to express their life plans, their charisms, in a diverse way. The centuries we left behind – the 1800s and particularly the 1900s – were characterized by huge cultural and political upheavals in the name of solidarity, and this is a good thing; consider the trade union movement and the civil rights struggle. The point is that a society that is good to live in cannot be satisfied with the horizon of solidarity, because a society practicing solidarity without fraternity would be a society everyone would seek to leave. The fact is that while a fraternal society is also a solidarious society, the converse is not necessarily true.

The fact of forgetting that a human society that extinguishes the sense of fraternity is not sustainable – a society that, on the one hand, reduces everything to improving transactions based on the exchange of equivalents, and, on the other, increases transfers made by public assistance organizations – explains why we have not yet attained a credible solution to the big trade-off between efficiency and equity, despite the quality of the intellectual forces in the field. A society in which the principle of fraternity evaporates has no future: that is, a society where only “give to haveˮ or “give out of dutyˮ exist is not capable of progress. This is why neither the liberal-individualist vision of the world in which (nearly) everything is an exchange, nor the state-centred vision of society in which (nearly) everything is an obligation or a duty, are reliable guides to lead us out of the shallows in which our societies are mired today.

What is it that suggests that the project to restore the common good to the public sphere – and to the economic sphere in particular – is something more than just a consolatory utopia? The ever-growing dissatisfaction with the way the principle of freedom is interpreted. It is well known that freedom has three dimensions: autonomy, immunity and empowerment. Autonomy has to do with freedom of choice: you are not free if you are not in the position to make a choice. Immunity has to do with the absence of coercion on the part of an external agent. It is, in brief, the negative freedom (that is to say the “freedom from”) cited by Isaiah Berlin. Empowerment, in the sense given to it by Amartya Sen, it has to do with the capability to choose, that is to say, to reach goals that are set, at least in part or to some extent, by the person herself. One is not free if he/she is never (or only partially) able to fulfil his/her own life plan. The liberal-free-market approach tends to secure the first and second dimensions of freedom at the expense of the third, while the state-centred approach, both in the version of the mixed economy and of market socialism, tends to support the second and third at the expense of the first.

Free-market neoliberalism is, of course, capable of spurring change, but not so capable of handling the negative consequences stemming from the marked time asymmetry between the distribution of costs and benefits. Costs are instant and tend to fall on the weakest part of the population; benefits come later in time and tend to go to the most talented. Joseph Schumpeter was among the first to recognize that the heart of the capitalist system is the mechanism of creative destruction – a mechanism that destroys “the old” to create “the new” and that creates “the new” by destroying “the old” in a Spencerian competitive process of survival of the fittest firm – but it is also its Achilles’ heel. Thus creativity is at once constructive but also destructive: evolutionary progress is by no means painless and it has never been. This means that there are not only winners but also losers and society pays for the new with various levels of hardship and a lot of suffering.

Now, the point deserving attention is that the destructive component of innovation has recently increased, relative to the income-enhancing creative part.[27] The destructive component can be viewed as a negative externality – a cost that is imposed on third parties without their consent. Such a negative externality can impact GDP, employment or both, and it can fall on both producers and consumers. This is a novelty compared to the previous period, when the Schumpeterian process was more creative than destructive. Indeed, the transition to a post-industrial economy has been far from advantageous to the wellbeing of a substantial share of the population. The argument of the optimists according to whom this time cannot be different from previous experience is a mere non-sequitur.On the other hand, while market socialism – in its multiple versions – places the state as the subject in charge of coping with the time asymmetry, it does not refute the logic of the capitalist market; it simply narrows its area of action and influence. The proprium of the paradigm of the common good is the effort to hold together the three dimensions of freedom: this is the reason why the principle of common good – as opposed to the principle of total good – appears today as an interesting perspective to take into serious consideration. Needless to say, the concept of common good is far from being universally accepted. When it is identified with a set of democratic freedoms or human rights or with the generic object of redistributive policies, it is widely accepted. But when it is presented as a good that is not only shared by citizens, but also exists in its own right, the level of acceptance declines considerably.

5. On the civil role of the business firm in the present time

Finally, I am going to address a third area where the civil economy paradigm can offer a credible way out of some of today’s major problems. The landscape of contemporary corporations is changing. Since the financialization of the economy in the early 1980s, corporate governance practices tightly linked the purpose of business with maximizing shareholder value. However, as the twenty-first century pushes on, there has been increased emphasis on other stakeholder values, particularly social and environmental concerns. This trend in corporate governance has fuelled the emergence of new organizational forms. So far attention has been devoted mainly to the business model. The time has come to also reconsider the role of the management model.[28]

Empirical evidence shows that the major crises of our time are a result of the way we conduct business. The traditional corporate form has, in many ways, monopolized our understanding of how we think and talk about business. The rise of new forms of organizations will require re-imagining what are the fundamental building blocks of business. As C. Mayer has recently written: “The corporation has evolved substantially over the past hundred years, but the very evolutionary processes that might have been expected to make it better suited to the world in which we live, have done exactly the opposite”.[29] One cause of this is certainly our own misconception about the nature and role of the company. It is dangerously reductionist to characterise it as a mere “nexus of contracts” between different parties, such as employees, suppliers, investors, clients, community. According to the received view, the company exists for the benefit of its owners – the shareholders – and those charged with running it – the directors – have the duty to further their interests. Today we know that this approach poses serious issues, as was remarked, among others, by pope Benedict XVI in his encyclical Caritas in Veritate: “Business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business”.[30]

The recently published UN Report[31] on the results achieved during the first fifteen years since the launch of the UN Global Compact, gives evidence that corporate practices are changing, albeit in slow motion, as a consequence of high-profile clashes between companies and civil society. It has become increasingly clear that the single-minded goal of profit maximization at any cost is fracturing societies and destroying the environment. Essentially, business has been threatening the very elements that underpin its own existence. Today, the umbrella of corporate sustainability (both social and environmental) covers a much broader range of issues than before. However, there is still a very long way to go before sustainability is fully embedded into the DNA of business on a global scale, even though there are clear signs of progress. In this regard, a strategically important role has been and will be played by civil society organizations that contribute to a cognitive overhaul of the purpose of business and its obligations to society, inspiring a new narrative around business as a force for good.

The question arises: which factors should be held responsible for the serious reductionism mentioned above? There is no doubt that a major factor has to do with the benign neglect of the ethical dimension in the discourse concerning business life. Indeed, while principles of morality are well developed in relations to individuals, they are not with respect to companies. Yet, the corporation is a moral agent in so far as it is a juridical person. The competitive advantage of nations depends on the moral fibre of its corporations. The risk of moral decay through market interactions has been discussed extensively in politics, ethics, sociology, but not in economics. Yet, empirical evidence shows that market interaction causally affects the willingness to accept negative consequences for a third party, which economic literature calls pecuniary externalities, these are not to be confused with technical externalities. Ethics in business schools tends toward economic instrumentality and a utilitarian outlook. This attitude is prone to the so-called “cut flowers syndrome”: the language of values may look attractive for a while, but severed from its cultural and spiritual roots, it withers.[32]

A relevant piece of evidence on the “cut flowers syndrome” comes from the recent experiment carried out by A. Cohn, E. Fehr, M. Marechal[33] concerning the financial sector’s business culture – a sector that in recent years has been involved in numerous scandals that have undermined confidence in the financial industry. Results suggest that the prevailing business culture in the sector favours dishonest behaviour, implying that measures to re-establish an honest culture are crucial. For example, several experts and regulators have proposed that bank employees should take a professional oath, analogous to the Hippocratic oath for physicians. Such an oath, supported by ethical training, could prompt employees to consider the impact of their behaviour on society rather than focusing on their own short-term benefits. A norm change also requires that companies remove financial incentives that reward employees for dishonest behaviour. These measures are an important step towards fostering desirable and sustainable changes in business culture.

In the search for the origins of unethical behaviour amongst entrepreneurs, attention has been given to the potential influence of a cognitive process known as moral disengagement. This process serves to deactivate the self-regulatory process that normally deters individuals from actions that would violate their own moral standards.[34] Three basic mechanisms tend to generate moral disengagement. Firstly, individuals can cognitively distort reprehensible acts so that they appear benign (e.g., “true, we did pump our waste into the lake, but the pollution we generate is trivial”). Secondly, people minimize their personal role in unethical decisions through diffusion of responsibilities (e.g., “I evade taxes, since fiscal pressure is too high”). Finally, people can hold victims responsible for the harm they suffer (e.g., “They did not pay attention, so it is their fault if they are exploited”). Indeed, a full understanding of morality must explain not only how people come to behave morally, but also how they can behave inhumanely and still retain their self-respect and feel good about themselves.

What are the consequences of the phenomenon briefly outlined in the previous paragraph? A first major consequence is that the inequalities we observe today are the result of power relationships, generated by the unfettered market’s tendency toward monopoly, rather than of marginal product.[35] Today, sectors such as telecoms, cable TV, digital branches, health insurance, finance, pharmaceuticals, agro-business and few others cannot be understood through the lens of competition. These sectors are simply oligopolies with a huge market power. It should be noticed that, apart from individuals and families, the increase in inequality also affects firms. For example, the 90th percentile firm in the US sees returns on investment in capital that are more than five times the median. A quarter of a century ago, this ratio was two. The implications are profound. The social and political legitimacy of market economy is based on the assumption of the competitive model. But if markets are monopolistic, hence based on exploitation, the rationale for laissez-faire disappears. Our economies have fallen short of any conception of a good economy – an economy offering a life of richness for all. Preoccupations are targeted to prospering, not to flourishing.[36]

A second important consequence of moral disengagement has to do with a peculiar phenomenon of the present epoch. The digital revolution fostered an age of improved communications, flexible work, increased automation, substitution of labour with technology. And yet, the numbers tell an entirely different story. Despite the enormous growth in computer power and a myriad of technological inventions, productivity has largely stalled. OECD[37] has considered the period 1970-2013, divided in two parts. Using G7 countries data, productivity grew by 2.6% on average per year between 1970-1990; in the second subperiod it grew by only 1.7% on average per year. It is certainly true that the second subperiod encompasses the Dot-com bubble of 2001 and the 2007-08 financial crisis; but the first subperiod includes financial troubles of no less calamity (two oil crises; the market crash of 1986 etc.).

So why did the advent of the 4th Industrial Revolution fail to translate into higher productivity and income growth?[38] Several explanations have been provided so far. The one I deem more relevant is known as “the great war management problem”, based on a historical analogy. World War I saw an unprecedented advancement of military technology with respect to the French-Prussian war of 1870. However, despite all these advances in technology, military strategy had remained unchanged since 1870. This led to a virtual stalemate, a prolonged war of attrition and countless casualties. Today, technology has grown so fast that it has surpassed our strategies. With few exceptions, management is still rooted deep in the past, at the time of the Tayloristic model of organization, where intrinsic motivations, wellbeing of employees, work-family balance, etc. never played any relevant role. This problem is akin to the “displacement of goals” (Robert Merton Sr.) in a bureaucracy. Rules and procedures that initially served to prevent administrative and financial chaos became goals of their own. The bureaucrat works toward rules and regulations as a goal. In the same way, managers work toward maintaining structures that are dated in the Digital Age. Business leaders are called to radically revise their model of organization, overcoming the fallacy of materialistic management.[39]

In the environment briefly described above, business leaders need to shape the conditions for continued prosperity. In a very interesting Report conducted by UN Global Compact and Accenture,[40] one can read: “The global economy is on the wrong track and business is not playing its part in forging a sustainable future”. This is a study of more than 1000 CEOs from 27 industries across 103 countries: the largest study to date. CEOs are committed to take action. They recognize that market rules need to be shaped to create a level playing field and a race to the top that rewards socially responsible performances. A corporate leadership agenda to shape the future is particularly urgent today. The great challenge is to balance two apparently conflicting objectives. Firstly, business leaders need to secure the sustainability and prosperity of their own companies. Second, they need to shape the conditions for continued and more inclusive economic prosperity and for global economic integration. This implies shaping the next wave of globalization. Whereas the last wave centred on accessing foreign markets and creating low-cost global supply chains, the next wave will follow a very different pattern, that might be more decentralized, more geographically differentiated, more digitally interconnected, and more cognizant of social impact and the importance of building capabilities rather than exploiting labour cost differentials.

To contribute to society, and to gain its support, businesses must be deeply embedded in it. One way this can be achieved is to establish social businesses that are adjacent to their core business models. This puts corporations in a position to solve some important problems by sustainable philanthropic contributions. To this end, one should consider the very recent emergence of benefit corporations (or B Corps), which are a new, fast-growing legal form of for-profit corporation. They are under no legal obligation to maximize shareholder value. Instead, they are legally bound to pursue social benefit. Born in the US ten years ago, benefit corporations exist in Italy and the UK, and legislation is advancing in Australia, Argentina, Chile and Canada. Many entrepreneurs are using this form of corporation to signal that they are serious about doing business in a different, more responsible way.

To somewhat generalize this point, I should indicate that the still dominant argument according to which “good ethics is good business” – as if to say that what is good for business is good for ethics – is accepted less and less today. What is favouring the discontinuance of this argument? Simply the acknowledgement of the fact that in many situations, Smith’s invisible hand ends up with cramps that prevent it from fully accomplishing its task. As Kaushik Basu wrote,[41] this celebrated principle has two sides, like a coin. The one theorized by Smith himself is the bright side; the other, masterfully evoked by Franz Kafka in The trial, is the dark side, generating perverse effects. Kafka’s allegory is a lucid description of how possessive individualism, when not balanced or controlled by the perspective of the common good, can lead to inauspicious outcomes. In such situations, Kafka’s invisible hand gains the upper hand over Smith’s.

A final consideration. A profound disruption is happening today in the workplace and in the economy at large, as the relentless march of technology had brought us to a point where machines and software are not just outworking us, but they are starting to outhink us in more and more realms. If machines can compete with people in thought, what makes us humans unique? And, what will enable us to continue to create social and economic value? The answer lies in the one thing machines will never have: a heart. Humans can love and can have compassion. This implies that the tech revolution will force human beings to create more value with their hearts and between them. Hence the growing importance of more human-to-human connections: “Machines can be programmed to do the next thing right. But only humans can do the next right thing”.[42]

We know that by solely following the rules of reason, one can certainly rationalize what already exists, but one cannot invent much. In order to really invent one needs to cast a blueprint of what makes sense, beyond simple rationality. It seems to me that those who recognize an eschatological dimension are better equipped for this task than those who live within a pure, enlightened rational dimension, which is surely capable of fostering rigorous analysis, but is much less capable of creative problem-solving. This is perhaps the most significant contribution of Catholic Social Teaching towards overcoming the neo-Machiavellian trend and the sentiment of despair so massively present in today’s culture. Indeed, it is the lack of hope, today, which is a major impediment to the spreading of the sense of possibility which is so necessary in order to change our cognitive maps and to allow entrepreneurs of all kinds to play their critical role in bringing ideas to life.

6. In lieu of a conclusion

As P. Ulrich has written,[43] there is a fundamental difference between a civilized market economy and a totalistic market society. In the former, the constitutional task is to define the inviolable human and civil rights and to guarantee their primacy against all kinds of powerful infringements. In the latter, most social relations take the form of market relations so that civil society is reduced to market society (Polanyi). The specific contribution of the civil economy theoretical paradigm is that of re-embedding the modern market economy with its incredible productive powers into an equally modern society by conceiving of a new way of interaction between market, state and civil society.

We will not overcome the mental barrier to such a civilized understanding of the economy as long as the logic of the free market maintains its primacy over the logic of society and the logic of the polity. A civilized market economy requires its citizens, as economic agents, to integrate their “acquisitive intentions” in their civic sense. As a result, they are interested in personal success and profit only as far as they, as citizens, can accept this as ethically and politically legitimate. Personal integrity means not to split one’s economic interests from one’s civic identity. In his recent #republic:Divided Democracy in the Age of Social Media,[44] Cass Sustein elaborates on the distinction between the freedom of the consumer who enjoys the full spectrum of choice and the freedom of the citizen who is a fit participant in a representative democracy. The Internet promotes consumer freedom, providing us with the information we want. But it can also suppress the citizen’s freedom, by limiting exposure to the full range of information citizens may not want, but absolutely need. The ability to customise our informational environment, delivered by social media, makes it less likely for citizens to come across information that would change their minds or encounter by chance perspectives different from their own.

To conclude, I would like to draw attention to the message sent by popes Benedict XVI and Francis to social scientists and economists in particular. This is the warm invitation to overcome, as soon as possible, the separability thesis according to which incentives and morals are additively separable, meaning that the effects of variations in the one do not depend on the level of the other. This is not at all true. The separability thesis implies that instrumental and intrinsic motivations are substitutes: more of one diminished the positive effect of the other. As underlined by Samuel Bowles,[45] policymakers can find ways – if they wish to do so – to turn the separability thesis upside down, making incentives and morals complements rather substitutes. This is the mandate for Aristotle’s legislator, according to the civil economy paradigm. For this we need a surplus of authentic culture in our entire scientific endeavour. Ambrosius, bishop of Milan (5th century) and Father of the Church once observed that authentic culture is always the result of two movements: “ nova semper quaerere, parta custodire”, i.e. “always try to look for new things, while keeping what you have inherited from tradition”. Authentic culture is the result of putting together one’s wings with one’s roots, since if it is true that wings without roots lead to adventurism, it is also true that roots without wings can degenerate into conservativism.